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“The trend… can be a friend, but you have to choose your friends wisely!”

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Hello Michael,

Thank you for all the work you have done. I truely appreciate your books. I suppose I have always been a closet Trendi… but strongly influenced by technicals such as head and shoulders, double tops etc. Unfortunately I could rarely operate in name as a Trendi!

Why?

I was an international fund manager for 21 years and handled up to $10 billion dollars in one Fund I worked for 3 major pension funds… sold out $10 billion of stock in 6 international markets in 1987… 2 weeks before the crash and had a 47% return that year… Why? Because the US market had a clear double top and it was a market which just about played every extreme. Later in 1992 I went into stockbroking. Now again a closet Trendi… Why in my two careers was I a closet Trendi?

A) In Fund management … big reports of bullshit figures for a boards consumption (yes, they still want and believe in it) and you give them what they truly believe!!!! And in Stock Broking… you speak the numbers… and then of course better and better numbers in other shares. Numbers to generate movement and commission. You are keeping the ball in the air. Hard to be a Trendi but under “other reasons” clients got taken out at the end of a positive trend. Sometimes only on strong persuasion were they persuaded to go… but good things stay good too long and every client can’t sell. Well 99% can’t sell and they loose unless the broker berates them. I have heard a million reasons why clients don’t want to sell and they are all greed or plainly a form of “hypnotic trance.” Like a kangaroo in a cars head lights they get paralyzed and can’t run!!! So I call this inability to sell “The Kangaroo Effect” “It’s the smart Trendi’s winning edge”… he’s out and the crowd continue and continue to be mesmerized by the light! So today I run my own money and for the record I am a total Trendi.

I have learned a lot from Gann and many other writers on “the trend”. Yes I have started reading all your books to gain a greater and greater insight… all good stuff… they are piled up beside me. And I enjoyed your movie, especially the winning strategy of successful poker players. A great insight and just the movement of the sheep, crowd Psychology, it was a terrific movie. Can you suggest any more good books to read?

I have my own system and so far so good, but if I can get a better stop out process and entry process then I will adopt it … so I keep reading and I keep learning to improve my game. I don’t know whether I am a natural, time will tell. But in two years I have turned $50,000 into $1.7 million. Many questions in my mind remain unanswered.

Why did the smartest Trendi, Jessie Livermore, loose it after getting it so right? How much of a Trendi was Bernie Baruch? Is Warren Buffett really a closet Trendi?

Why do so many Fund Managers average down but rarely average up and why do so few fund managers ever cut their loosing positions (my own belief is the ego is too big to admit a mistake)? Yes it’s always just a bad market! Much easier to sell a bad market to the directors rather than admit a mistake and get kicked out pronto… After all, directors can only do one thing with people who make consistent mistakes… even if they are very good and consistently out perform the index!!! It’s like Eric Barker says in “Barking up the wrong tree”. Good people who follow the systems that prevail are trusted even though the Philosophy is wrong. So smart people know they can only operate the correct philosophy to win under disguise!!! Could successful people all be outliers, just closeting themselves and appearing to be true company men? I know I did it because people love stories and any story can be designed to fit success! I am glad I finally can do it all my way and can stick to my knitting… The trend in the end, can be a friend, but you have to choose your friends wisely!

Your strong supporter.
[Name]

Thanks!

Find Fund Managers Across Books and Podcast

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Hi Michael, I really enjoy your podcast and the alternative ideas you put out. Please keep up the good work! I was wondering if you could help me with a question please. If one had around USD100,000 to allocate to a trend following manager would there be one or a couple of stand-out managers that you would put forward. I understand you are obviously not in a position to make specific recommendations: the question really just goes to accessibility of particular funds for that size of investment, as I understand that amount is too small for many funds. I have been in contact with [Name] at [Name] already, but would like to thoroughly explore options. I would prefer a manager that only takes carried interest and no fees in down period. By way of background I am Australian citizen but a long term resident of Japan.

Many thanks
[Name]

Absolutely no names, other than all the leads you can find across my podcast and books!

The High Priests of Finance

Courtesy of The Economist:

Finance even has its own high priests in the form of the analysts and fund managers who promise their clients heavenly rewards if only they listen to their advice. They preach regular sermons in the form of brokers’ notes and quarterly reports, and they house themselves in vast cathedral-like buildings that dominate the skyline. Each day also has its canonical hours as traders pray for profitable opportunities at the European, American and Asian market openings. Finance has its annual calendar, too, marked with festivals known as results seasons in which the lucky participants receive their temporal (rather than spiritual) dividends.

And like any self-respecting religion, finance has its doctrinal schisms as well. Active fund managers are a bit like the medieval Catholic church, offering eternal salvation to those willing to pay the appropriate sum, which are known in modern parlance as performance fees rather than indulgences. The active-investment sect has its elaborate rituals and language, with a liturgy (“information ratios” and “alpha generation”) as baffling to the layman as the Latin mass was to the medieval peasant. Clients are supposed to listen to their presentations in a reverential hush, trusting that all the mumbo-jumbo will deliver superior results. The passive fund managers, or index-trackers, are akin to early Lutherans. Investors have no need for priestly intermediaries between them and the market, say the index-trackers. All they require is the full text of those companies that are included in the benchmark.

Finance also has its equivalent of holy men, the gurus who pronounce on the market outlook. Not for nothing is Warren Buffett known as the “sage of Omaha”. The faithful conduct an annual pilgrimage to Nebraska every year to attend the annual meeting of his company, Berkshire Hathaway. His folksy demeanour would surely make him the ideal neighbourhood priest, bringing comfort through life’s ups and downs.

Nice.

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